Revenue – ifrs 15 handbook

 
Additional application examples
Example 8 – Allocating variable consideration: Series of distinct 
services
Company X is an electricity provider. X enters into a contract with Customer C to 
supply electricity for one year on the following terms.
– The amount and timing of the electricity supply are at C’s discretion: i.e. the 
quantity is variable.
– The fee includes a fixed and a usage-based component. 
– The fixed fee is 1,200 and is payable in monthly instalments. 
– The usage-based fee is a standard price of 1 per kWh and is payable at the 
end of each month. The price per kWh is fixed for the whole contract period. 
X determines that it has a stand-ready obligation to supply electricity because 
the amount and timing of the supply are at C’s discretion. X also determines that 
this stand-ready obligation is a series because: 
– each increment of X’s services (e.g. month, day etc) is distinct and has the 
same pattern of transfer to C; 
– C simultaneously receives and consumes the benefits of the electricity as it 
is provided (see 
Section 5.2
); and 

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4 Step 4 – Allocate the transaction price to the performance obligations in the contract | 109
4.2 Allocate the transaction price
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IFRS 15.BC285
– X would use the same time-based method to measure its progress in 
transferring each increment of its service to C (see 
Section 5.3
). 
X allocates the fixed fee on a straight-line basis throughout the year. This is 
because the fixed fee relates to a stand-ready obligation. X allocates the variable 
fee based on the daily or monthly electricity consumption. This is because, 
under the terms of the contract, the variable payment relates to the amount of 
electricity used during a period and therefore variable consideration is allocated 
only to the satisfied portion of a performance obligation. This allocation is 
consistent with the allocation objective. The pricing is consistent throughout 
the contract and the rates charged are consistent with X´s standard pricing 
practices with similar customers.